Companies Act Changes – Purchase of Own Shares


There has been confusion about some of the changes in company law brought in by the Companies Act 2006, which was fully implemented on 1 October 2009. One of the more beneficial changes for companies wishing to reorganise their share capital (perhaps because a founder shareholder is nearing retirement or to facilitate new investment) is the ability of companies limited by shares to purchase their own shares unless there is any specific restriction on or prohibition of this in their articles. This is a great benefit to companies, as a purchase of own shares can often be an efficient way to buy out the interest of a shareholder without requiring other shareholders to find substantial sums from their own pockets in order to finance it.
One of the less well-publicised aspects of this procedure can be found in Section 702 of the Act, which should be read by anyone considering a purchase of own shares. This makes it compulsory (for a period of ten years from the date of the transaction) to make available to any member of the public who requests them the details of any purchase of shares by the company, and makes it a criminal offence for access to this information to be refused. It is also a criminal offence (Section 658) for a company to acquire its own shares improperly.
Says <<CONTACT DETAILS>>, “We would expect the use of purchase of own shares to become more frequent and the issue of redeemable shares to become more common when companies are set up, to allow greater flexibility of exit routes for founder shareholders.”
To bring your company’s articles up to date or discuss any company law or reorganisation issue, contact us.
Partner Note
See the Companies Act 2006, Chapter 4 at

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